China to trial VAT on telecoms services

China will trial a new VAT for telecommunication services providers as a replacement for business tax, Premier Li Keqiang told parliament earlier this week, The Star Online writes. Although details of the plan are yet to be made public, a levy of around 11% is expected to be introduced within 1H 2014. The new tax will negatively impact the bottom line of the nation’s main three telcos – China Mobile, China Unicom and China Telecom – although consumers may benefit from the measures, as providers may offer free or greatly discounted handsets with contracts to limit tax expenses. Commenting on the changes, Zhou Xiaoke, a spokesperson for China Unicom explained that the announcement did not come as a surprise to the telco, but without further information it was impossible to comment on the decision: ‘We have discussed this for a while, but we haven’t received any official notice from the government. We support the government and we will promote the policy, but since we haven’t received the official notice it is too early to talk about [the financial impact].’